Combined with whole ecosystems of connected applications to automate transactional services - from bookkeeping to raising finance and beyond - the opportunity is there to broaden and deepen the service offering to SME market and gain:

Significant fees by nurturing fast moving businesses

Insight and leverage from huge amounts of core data

Big Four acquisitions of digital and analytics businesses in recent time has been noteworthy, however the control and access to the primary data will be invaluable to corporate and public sector clients too.

Why is the UK ready?

Put simply:

Scale (5m+ firms in UK)

Disruption by cloud well underway

Diversity of risk

Tech rich

Many early stage businesses with high growth potential

Need for access to finance and advice

But also newer business owners are as much concerned about business lifestyle as they are about profitability.

Flexibility, remote working, accessible services, immediacy, and control are common words used to describe their approach- and crucially they value insight.

They’re open to new ideas, and new ways of working.

The radical approach: KPMG Small Business Accounting

KPMG’s Small Business Accounting service is there to fundamentally disrupt the market place. And it could work.

Unlimited access to a dedicated qualified accountant. Best of breed software subscriptions, tied together with neat analytics, VAT, corporation tax, and payroll (with AE), company secretarial... all packaged up into a regular monthly subscription.

Add benchmarking, performance metrics and regular business reviews and the proposition is pretty much everything you need to look after a small growing business.

Given the actual amount of face-to-face time most firms will have with clients, this represents an equally complete service with the underlying message of location is irrelevant. Service, contact and insight is everything.

Holding and generating the key business data for clients in the cloud gives enormous scope for other automated services not least in this case pre-approval for their funding platform and ability to generate formatted data for prospective investors at speed. An area that their corporate size and influence could leverage more and more.

Ruthless efficiency, simple to scale, flexible and dynamic (as watchers of their website can testify there are continuous rounds of refining the pricing and proposition), easy to understand, and heavily marketed - this is a well-researched and well-funded venture built from the ground up to try and run a good quality service, at scale.

With approaching 800 clients in November 2015, it should be closer to 1,000 by now. With no geographical restrictions they can grow to a considerable size without necessarily any firm in the UK feeling the squeeze.

PwC: My Financepartner

Focussing on up to £50m turnover businesses, and a model based upon more direct face-to-face relationships, distinguishes it from the mass market approach of KPMG.

The cloud however is still essential to the service provision. Largely tech agnostic, data is pulled together from across the business's other systems to generate insight. Accounting is supplemented by an advisory service with a clear growth agenda

The compliance and accounting outsourcing part is arguably less of interest than the strategic FD role they can play as a consequence of having overview of all this information.

However the cloud enabled data collection and powerful analysis, and the support around the compliance and standard reporting function is essential to make sure that it all stands up and performs cost effectively.

What is the appeal for SMEs?

Evidence seems to suggest that the main appeal is reassurance of the brand. Aligning with the reputation, gravitas and investor appeal of a big named firm is seen as a good thing. But what is also clear is that this is being backed up with clear cut service, insight and adjustable pricing. So the brand and the service and the price point are working.

Arguably now, any size business can be a Big Four client, and it simply wouldn’t be possible without cloud as the core enabler of the service.

To what extent do they pose a risk to most firms will still need to be seen. However with the direction of travel increasingly pushing firms towards a digitally enabled future, the advantage for these mega firms has been to create standalone services that skip the difficult evolution that many firms still face.

The second article in the 'Adapting to the cloud' series combines two interviews with contractor specialists firms.

Replies

If KPMG have been running for over a year with the huge marketing spend they have put out signing up 800 clients doesn't seem that good to me, and I would have expected the numbers to be much higher, for their profile and and a national operation.

As I understand they prepaid 5000 Xero licences to buy top spot as Xero No 1 reseller but if they have only signed up 800 clients they must not be very happy with the sign up rate and must be burning money at a massive rate.

I suspected it might not be going too well as I had only heard of one company who had switched to them locally to me. I therefore suspect that the personal relationship with a local Xero accountant is what small traders prefer over the lure of a "big name".

I am not concerned. Have been on receiving end of a big 4 SME service and the geographical remoteness and lack of business understanding will push many back to their local accountant. You often get trainee accountants who rotate every few months- most clients want consistency and face to face time.

It may not disrupt too much the core of most firms long term client base, but in the case of KPMG Small Business Accounting it is certainly appealing (and trying very much to appeal to) clients where the face to face part is less important, where core bookkeeping and accountancy services still are, where insight and support is more valued, and where the kudos and the brand is meaningful. The price point is enough to dissuade the contractors, Glennzy.

I would probably say that to equate each with 'Big 4 service' is not quite right. They are both discrete entities, where apparently most of the employees have been recruited outside the existing business. These are bottom up new services, with a firm focus on client service and quality delivery.

Also there is an underlying but core benefit of the data and what you can do with it. These are long term strategies, which are being articulated and developed in an agile way.

Many firms won't feel the impact, however that doesn't mean that they won't continue to develop substantial client bases over time.

Agree that many will be swayed by the brand, however I wouldn't be surprised if it actually damages their brand in the long term.

The prices start out reasonable enough but move upwards quickly.

I wouldn't say the processes are slick either or that they offer any insight at all...most of the bookkeeping is done in line only with the past step by step processes and there is little real understanding of the business.

I could be being harsh but just my experience.

I do think they will struggle especially with reality versus client expectations

Agree with that many will be swayed by the brand, however I wouldn't be surprised if it actually damages their brand in the long term.

The prices start out reasonable enough but move upwards quickly.

I wouldn't say the processes are slick either or that they offer any insight at all...most of the bookkeeping is done in line only with the past step by step processes and there is little real understanding of the business.

I could be being harsh but just my experience.

I do think they will struggle especially with reality versus client expectations

Time will tell!

The KPMG service is based around a platform of Xero, Receipt Bank, Spotlight and others - not unlike many accountants today. There is a focus on quarterly reporting and insight and monitoring of KPIs so there is at least some attempt to get to that 'real understanding' . There is also an understanding of the importance of client experience and satisfaction, and am lead to believe that front line accountants are measured more against NPS (Net Promoter Score) than time or billing.

But they're not idiots in the sense that they really think they'll get Big 4 service on a part with that received by big corporations, for the sort of starter prices that are being bandied about.

Many potential clients I've spoken to have seen the adverts or received emails about the Big 4 services, but just want to go with a local, more personal service.

Having said that, there must be an expectation among the Big 4 that they'll expect to get enough money back from higher-level services to justify the outlay. Chris Frederikson at the 2020 conference indicated from a conversation he'd had that the outlay of several £million would be repaid several times over (can't remember the figures he used - possible someone else who was there might.)

I'm not sure that either of these services are claiming Big 4 service per se, but rather the benefit of the brand, and access to a level of expertise.

They are both quite different to each other. In particular My Financepartner has a clearer agenda towards higher growth businesses (and well funded start ups). Operating regionally, with as much of the traditional networking and BD approaches of regional firms, and recruiting from outside of the main PWC business experienced Management as well as practice accountants makes them *more like* a traditional practice, but with a very specific service offering.

KPMG have invested around £40 million to research, create, and sustain their offering. No small sum.

Both have a vested interest in helping to secure funding, and offering more complex advice as businesses grow. The former will certainly generate fees, the latter should follow depending on the trajectory of their clients.

Their will always be a tendency for local businesses to gravitate to a local firm, but for how long, in what volumes, and for which services is debateable.